reply to 4 students using 125 words or more towards each student and ADD a direct question to each reply. Ensure each name is with its corresponding reply.
1st Student Patrice Mbang On
Risks have significant potential to impact a capital budget. One risk occurs when cash flows are not paid within the agreed time. Delayed cash flows can cause an organization to have minimal funds for the intended investments (Siziba & Hall, 2021). This risk forces the organization to prolong the undertaking of the investment as it awaits the cash flows. Another risk is the investee company collapsing. When the business entity in which an investment is made collapses, the investment can be revoked or deemed redundant. It may culminate in losses or compensation that is lower than the initial investment to the investor. Last but not least, there exists the risk of management sinking the invested funds in risky projects. The investments can be so risky that it is almost certain that there will be no Return on Investment (ROI).
Risk mitigation aimed at attracting capital investors to a sports project demands the adoption of risks premiums. These are discount rates added to risk-free borrowing rates (Gleißner, 2019). They guarantee that the returns on riskier projects will be higher for the investors. The use of certainty equivalents are also appropriate as they determine the degree of risk associated with future cash flows. They help in converting expected future cash flows into certain cash flows, providing a true picture of future events regarding cash flows. Specifying reasonable payback periods can convince the investors. This is the time it will take the sports projects to pay the investors the money they invested. The returns of the projects should not fall beyond the time limit because it will portray the riskiness of the investment.
Gleißner, W. (2019). Cost of capital and probability of default in value-based risk management. Management Research Review, 42(11), 1243-1258. https://doi.org/10.1108/mrr-11-2018-0456
Siziba, S., & Hall, J. H. (2021). The evolution of the application of capital budgeting techniques in enterprises. Global Finance Journal, 47, 100504. https://doi.org/10.1016/j.gfj.2019.100504
2nd Student Zachary Rasp
As mentioned, the global economy has had a big impact on how investors move forward with investing. There’s risk involved in every move we make so being able to mitigate risk provides help for investors. One issue investor may see in the capital budget is the cash flow. If budget showcases a questionable cash flow, they may lean another way. The cash flow should be stout and accumulated perfectly on time. Using a sensitivity analysis could show the investors that cash flow is not going to change and that the return will always be on time. “To encourage investors to invest their funds into risky projects, the returns from such projects should be higher than returns from less risky investments such as treasury bonds. A risk premium is a discount rate that is added to the risk-free rate of borrowing. The risk-free rate is the rate of return of low-risk investments such as government-backed securities. The investments are then appraised using the resulting discount rate. Investments that offer better returns are chosen.” (Adams, 2022) A better bang for each investors buck is important and the returns must meet their times set. Each risk taken should be calculated and evidence should be provided that it’s worth it for the investors. These risk can be things such as the markets risk and each individual project risk. Although a stadium being built is one huge project there’s a ton of smaller project risk that may go along with it that have their own issues. The capital budget should provide evidence that each risk is worth it and brings in a good rate of return.
3rd Student jeremy shelton
In the current world that we are in, risk is a huge factor when it comes to investing in any sort of large project. A capital budget can help identify the risks associated with a potential project while projecting potential costs that also come with it and assist investors in making the right choice for their company. “Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.” (Kenton, 2022). The best way to portray this to sports is in a scenario where a new stadium or athletic facility is being built that will cost millions to construct. Risk can be mitigated to attract investors by ensuring that they will have a guaranteed return on their investment regardless of our risk. “Investors try to avoid risk. To encourage investors to invest their funds into risky projects, the returns from such projects should be higher than returns from less risky investments such as treasury bonds. A risk premium is a discount rate that is added to the risk-free rate of borrowing. The risk-free rate is the rate of return of low-risk investments such as government-backed securities. The investments are then appraised using the resulting discount rate. Investments that offer better returns are chosen.” (Adams, 2016). Giving the investors that security blanket of funds that will be returned to them while projecting bigger returns on the project is something that can help them feel the warm and fuzzy and pull the trigger on joining us on this adventure.
Kenton, W. (2022, September 26). Capital budgeting: What it is and methods of analysis. Investopedia. Retrieved January 10, 2023, from https://www.investopedia.com/terms/c/capitalbudgeting.asp
Adams, D. (2016, October 26). The best ways to incorporate risk into capital budgeting. Small Business – Chron.com. Retrieved January 10, 2023, from https://smallbusiness.chron.com/ways-incorporate-risk-capital-budgeting-15317.html
4th Student Patrice Sixoeight
The Uniform Athlete Agents Act (UAAA) is a state law. This is because it was created by the urging of the National Collegiate Athletic Association (NCAA) in 2000 as a state legislation body (Lens, 2020).
The UAAA applies to athlete agents. It regulates their conduct and requires them to register with a state authority. This requirement is to grant them permission to act on behalf of the athletes in the particular state.
It is a requirement to register under the UAAA in Texas. According to the Occupations Code in Chapter 2051, contacting an athlete, whether directly or indirectly, and entering into contracts requires an agent to have registered.
The Secretary of State has the right to issue the certification to the athlete agents. No tests are required. The Secretary of State reviews the applications of the agents and grants a certificate of registration to successful applicants (Masteralexis, 2020).
The UAAA has the authority to revoke contracts between athletes and agents who have not been registered. They can also issue a penalty of up to $50,000 to the agents for violating the Act.
The Act allows athletes to cancel contracts with unregistered agents within 14 days. The duration is from the time of signing the contract and the athletes are not required to give any reasons for cancellation.
An athlete agent may not intentionally:
Fail to registered when required by Section 4.
Predate or postdate an agency contract.
Provide misleading or false information in an application for registration or renewal registration.
Lens, J. (2020). Application of the UAAA, RUAAA, and State Athlete-Agent Laws to Corruption in Men’s College Basketball and Revisions Necessitated by NCAA Rule Changes. Marq. Sports L. Rev, 30(47).
Masteralexis, L. P. (2020). The law of agency and athlete agents. Sport Law, 197-225. https://doi.org/10.4324/9780429322365-8